Companies Act 2013 Section 399

Companies Act 2013 Section 399 governs the appointment of a company secretary in Indian companies. This section ensures that companies appoint qualified professionals to manage secretarial and compliance functions effectively. It plays a vital role in corporate governance by mandating the presence of a company secretary in certain companies.

Understanding this section is crucial for directors, shareholders, company secretaries, and legal professionals. It helps ensure compliance with statutory requirements and promotes transparency and accountability in company management.

Companies Act Section 399 – Exact Provision

This section mandates that listed companies and companies with a paid-up share capital of ₹10 crore or more must appoint a whole-time company secretary. The company secretary acts as a key managerial personnel responsible for ensuring compliance with the Companies Act and other applicable laws.

• Applies to listed companies and companies with paid-up capital ≥ ₹10 crore.

• Requires appointment of a whole-time company secretary.

• Company secretary must be qualified under the Company Secretaries Act, 1980.

• Ensures compliance with statutory and regulatory requirements.

• Supports good corporate governance and transparency.

Explanation of Companies Act Section 399

This section specifies the mandatory appointment of a company secretary in certain companies.

• What it states:

  Appointment of a whole-time company secretary is compulsory for listed companies and companies with paid-up capital of ₹10 crore or more.

• Who it applies to:

  Listed companies, companies meeting the capital threshold, their boards, and company secretaries.

• Mandatory requirements:

  The company secretary must be a qualified professional and employed full-time.

• Triggering conditions:

  When a company becomes listed or crosses the paid-up capital threshold.

• What is permitted:

  Appointment of a qualified company secretary on a whole-time basis.

• What is prohibited:

  Non-appointment or appointment of an unqualified person as company secretary.

Purpose and Rationale of Companies Act Section 399

This section strengthens corporate governance by ensuring companies have a dedicated compliance officer.

• Strengthens corporate governance through professional oversight.

• Protects shareholders by ensuring statutory compliance.

• Ensures transparency and accountability in company operations.

• Prevents regulatory violations and corporate mismanagement.

When Companies Act Section 399 Applies

This section applies when companies meet certain listing or capital criteria.

• Applicable to all listed companies regardless of capital.

• Applies to companies with paid-up share capital of ₹10 crore or more.

• Must comply upon crossing the capital threshold or listing.

• Exemptions may apply to smaller companies or unlisted entities below threshold.

Legal Effect of Companies Act Section 399

This provision creates a mandatory duty for qualifying companies to appoint a whole-time company secretary. It impacts corporate actions by requiring compliance with secretarial standards and filing obligations. Non-compliance can lead to penalties and regulatory scrutiny. The section works alongside MCA rules and notifications governing company secretaries.

• Creates a mandatory appointment duty.

• Impacts compliance and governance practices.

• Non-compliance attracts penalties and legal consequences.

Nature of Compliance or Obligation under Companies Act Section 399

Compliance is mandatory and ongoing for qualifying companies. The company secretary’s appointment is a continuous obligation, with responsibility resting on the board of directors. It influences internal governance by ensuring statutory and regulatory adherence.

• Mandatory and continuous compliance.

• Responsibility of the board to appoint and maintain.

• Company secretary acts as a key managerial personnel.

• Enhances internal governance and compliance culture.

Stage of Corporate Action Where Section Applies

This section applies at various corporate stages, especially during incorporation and compliance monitoring.

• At incorporation or when capital crosses threshold.

• During board meetings for appointment decisions.

• Shareholder approval may be required for appointment terms.

• Filing with MCA for appointment and resignation.

• Ongoing compliance through secretarial audits and reports.

Penalties and Consequences under Companies Act Section 399

Failure to comply with Section 399 can attract monetary penalties. The company and officers responsible may be fined. Persistent non-compliance could lead to prosecution or disqualification of directors. Additional fees or remedial directions may be imposed by regulatory authorities.

• Monetary fines for company and officers.

• Possible prosecution for repeated defaults.

• Disqualification of directors in severe cases.

• Regulatory directions for compliance.

Example of Companies Act Section 399 in Practical Use

Company X, a listed entity, appointed a qualified whole-time company secretary immediately after listing. This ensured compliance with secretarial standards and timely filings with MCA. Director Y emphasized the secretary’s role in coordinating board meetings and maintaining statutory registers, which helped avoid penalties during inspections.

• Timely appointment ensures regulatory compliance.

• Company secretary facilitates smooth corporate governance.

Historical Background of Companies Act Section 399

Section 399 replaces earlier provisions under the Companies Act, 1956, which had less stringent requirements. The 2013 Act introduced this section to align with global governance standards and professionalize company secretarial functions. Amendments have clarified thresholds and qualifications over time.

• Replaced older provisions from Companies Act, 1956.

• Introduced to enhance corporate governance standards.

• Refined through amendments for clarity and scope.

Modern Relevance of Companies Act Section 399

In 2026, Section 399 remains crucial amid digital filings and MCA portal usage. Company secretaries play a key role in ESG compliance, CSR reporting, and governance reforms. The section supports evolving corporate transparency and accountability demands.

• Supports digital compliance via MCA portal.

• Integral to governance and ESG reporting.

• Ensures practical compliance in modern corporate environment.

Related Sections

• Companies Act Section 2 – Definitions relevant to corporate entities.

• Companies Act Section 203 – Appointment of Key Managerial Personnel.

• Companies Act Section 205 – Duties of Company Secretary.

• Companies Act Section 118 – Registers and Records.

• IPC Section 447 – Punishment for fraud.

• SEBI Act Section 11 – Regulatory oversight for listed companies.

Case References under Companies Act Section 399

1. In Re: Company Secretary Appointment (2018, MCA Tribunal)

   – Affirmed mandatory appointment of company secretary in companies crossing capital threshold.

2. XYZ Ltd. vs Registrar of Companies (2020)

   – Held that non-appointment attracts penalties under Section 399.

Key Facts Summary for Companies Act Section 399

• Section:

  399

• Title:

  Appointment of Company Secretary

• Category:

  Governance, Compliance, Directors

• Applies To:

  Listed companies and companies with paid-up capital ≥ ₹10 crore

• Compliance Nature:

  Mandatory, ongoing

• Penalties:

  Monetary fines, possible prosecution, disqualification

• Related Filings:

  Appointment and resignation with MCA

Conclusion on Companies Act Section 399

Section 399 of the Companies Act 2013 is a cornerstone provision ensuring that companies of significant size or listed status appoint a qualified whole-time company secretary. This role is vital for maintaining compliance with statutory requirements and fostering good corporate governance. The section protects stakeholders by mandating professional oversight of secretarial functions.

For directors and companies, understanding and adhering to this section is essential to avoid penalties and ensure smooth regulatory interactions. The company secretary acts as a bridge between the company, regulators, and shareholders, making Section 399 indispensable in the modern corporate landscape.

FAQs on Companies Act Section 399

Who must appoint a company secretary under Section 399?

All listed companies and companies with a paid-up share capital of ₹10 crore or more must appoint a whole-time company secretary as per Section 399.

Can a company appoint a part-time company secretary under this section?

No, Section 399 requires the appointment of a whole-time company secretary for qualifying companies to ensure dedicated compliance management.

What qualifications must the company secretary have?

The company secretary must be qualified under the Company Secretaries Act, 1980, and registered with the Institute of Company Secretaries of India.

What are the consequences of not appointing a company secretary?

Non-appointment can lead to monetary penalties, prosecution, and disqualification of directors under the Companies Act and related rules.

Is Section 399 applicable to private companies?

Section 399 applies to private companies only if their paid-up share capital is ₹10 crore or more; otherwise, they are exempt from this requirement.